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PwC Singapore Real Estate Practice

Your challenges, our solutionsCreating value for Singapore’s real estate businesses

3PwC Singapore Real Estate Practice

PwC real estate practice

PwC Singapore’s real estate practice provides industry-focused Assurance, Tax and Advisory services to build trust and enhance value for our real estate clients and their stakeholders.

We listen to different points of view to help organisations solve their business issues as well as identify and maximise the opportunities they seek. Our team comprises of experienced professionals with comprehensive understanding of industry specific regulations as well as issues distinctive to both local and global environments.

With more than 180,000 people in 158 countries across our network, our cohesive structure combined with the depth of our capabilities, knowledge and expertise, enables us to swiftly mobilise our resources and efficiently manage all aspects of cross-border engagements, delivering first rate quality and meaningful value to your business.

Globally, PwC has also established dedicated practices in real estate markets including, Berlin, Hong Kong, London, Mumbai, Paris, San Paulo and Tokyo.

You can be assured of extensive industry insights as we keep ourselves abreast of current issues in the market and constantly invest in highly regarded thought leadership along with specialised research activities to ensure that we fully understand the developments in your industry.

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Foreword

PwC is proud to present our real estate practice’s statement of capabilities, bringing you highlights on our firm’s industry experience and value adding solutions that we have provided our clients, which are illustrated in a series of case studies in this publication.

This document reviews a spectrum of business challenges encountered by our clients - such as initial public offering, internal controls, tax, enterprise resource planning, procurement and mergers and acquisitions - followed by how these issues are addressed by our team of multi-disciplinary industry specialists and the value outcome delivered, including resolving complexities, managing risks, improving performances and realising cost efficiencies in an increasingly competitive market.

Please feel free to contact me if you’d like to discuss the issues presented in this publication or other challenges faced by your business. Our team is always in gear to assist you in every way.

Thank you and enjoy the publication.

Yeow Chee KeongReal Estate and Hospitality Leader+65 6236 [email protected]


• Howwecanhelp Aligning ourselves to your business 06

Start to end support in deals and capital market transactions 09

• Howwehavehelpedourclients A successful roadmap for an IPO 13

Maximising the value out of an acquisition 14

Getting the desired results 15 through collaboration

Business process re-engineering study and preperation of enterprise resource planning (ERP) system implementation requirements 16

Document imaging solutions for cost savings and productivity 17

Capital vs trading gains –Itcanbeafineline 18

Improving procurement and 19 reducing costs

Embedding internal controls in 20 daily operations

Improving procurement process using analytics 21

• Researchandinsights 22

• Getintouchwithourexperts 25

Contents

We invest in relationships

We focus on enhancing

the value of our clients and our people

We put ourselves in your shoes

We share and

collaborate

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HowwecanhelpAligning ourselves to your business

Prolonged economic uncertainty has made it an imperative for real estate businesses to continuously assess and optimise opportunities to grow revenue, minimise risks, improve operations and performance as well as reduce cost in order to remain competitive.

At the heart of our mission is to assist our clients in identifying, assessing and managing a spectrum of business issues; working with them to develop solutions that address the challenges they face, ultimately, delivering value to their businesses and stakeholders.

Our strategy is aligned across these key functions crucial to all businesses:

• Financial and operational due diligence

• Business structuring• Financial modelling• Deal advisory &

valuation• Strategy

• Accounting advisory

• Assurance services• Controls and

governance• Stakeholders

management

• Risk management for real estate companies/funds

• Board structure & effectiveness

• Dispute analysis and investigations

• Litigation support

• Capital raising assessment & sourcing

• Capital markets & REITs advisory

• Initial public offering

• Real estate portfolio analysis and structuring

• Structuring of SPVs

• Tax structuring and advisory

• Tax compliance • Transfer pricing

• Change management

• Performance improvement

• Project management• Data & information

systems• Outsourcing

alternatives• Compensation

& benefits

Business Planning

Financing Growth

PortfolioRestructuring

Mergers & acquisitions

Tax Optimisation

Regulatory Compliance

Operational Efficiency &

People

Ownership Governance

Crisis Management Sustainability

Optimising Growth

Max

imisi

ng

Profit

Minim

ising

Risk


Howwecanhelp

Our commitment to delivering high-quality services is at the heart of what we do.

We provide comprehensive audit and assurance services designed to deliver real value and underpin investor confidence.

•Finance– Assurance services– Financial accounting & reporting– Accounting advisory– Initial public offerings– Finance function effectiveness– Global investment performance standard (GIPS)

•Governance, risk & compliance– Regulatory compliance– Governance & board communications– Risk management– Internal audit– Internal controls & revenue assurance– Forensics & investigation– Hotel operator operational review

Tax regulatory issues are at the top of mind for companies operating around the world. PwC is the leading provider of tax services worldwide, focusing on helping clients understand tax regimes and develop tax strategies for the various taxes that come into play.

•Tax– Investment tax structuring– Post-acquisition tax planning & restructuring planning opportunities– Pre-IPO & warehousing stage tax planning– Asset vs share deal analysis– Tax due diligence– Interest deduction advice & optimisation– Tax ruling applications– Fund & REIT structuring– Tax incentive planning & application– Stamp duty advice, including relief analysis & application– Withholding tax planning, including treaty benefit analysis & application– Transfer pricing– Tax function effectiveness– Carried interest taxation– Capital allowance maximisation study– Exit tax planning, including documentation development– Tax compliance– Tax solutions

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Our Advisory team utilises our in-depth financial, analytical, industry and business process skills to provide clients with the advise and assistance to improve stakeholder value, build trust and boost performance, as well as help business challenge conventions. We introduce and deliver strategies that work specifically for your organisation.

•Operations and transactions– Valuation– Transaction due diligence Corporate finance– Loan origination & securitisation services– Transaction support & structuring– Procurement function assessment & development– Data analytics– Restructuring & insolvency services– Asset monitory & asset management– Litigation & arbitration– Hospitality & leisure services– Financing growth– Portfolio restructuring– Financial modelling– Board structure & effectiveness– Structuring of Special Purpose Vehicles (SPV)– Change management– Performance improvement Compensation & benefits– Sustainability– Crisis management

•Technology– Reporting & forecasting– System selection assistance– System implementation assurance– Information technology effectiveness– IT security– Data privacy & management– IT asset management– Business continuity planning


DealsWith strong network connectivity, we form teams across our lines of services and network to help our clients create value through mergers, acquisitions, disposals and restructuring.

In the event of a M&A, we support our clients through a deal process as follow:

• Growth strategy

• Lead advisory

• Market study

• Market entry strategy

• Investment & partnering strategy

• Tax efficient investment structure

Deals continuum and summary of services

• Pros & cons analysis of asset vs share deal

• Financial & tax due diligence

• Commercial & market due diligence

• Human resources due diligence

• Synergies validation

• Deal structuring

• Valuation advice

• Negotiation support

• Completion assistance

• Purchase price allocation

• GAAP conversion & reconciliation

• Review documents for tax efficiencies

• Add-on deal identification

• Integration planning & project management

• Corporate governance & internal controls alignment

• Restructuring & turnaround strategy

• Post-acquisition tax planning

• Exit tax planning

• Strategic repositioning

• Back office coast reduction & restructuring

• Business process & infrastructure improvement

• Divestment advice

• Refinancing advice

• IPO advice & capital raising

• Review exit tax planning

Identify

Where are the opportunities in today’s market?

Evaluate

Is this a good investment opportunity?

Execute

What is the most efficient way to close the deal?

Stabilise

How do I achieve stability and early post-deal wins?

Maximise

How do I maximise downstream value through change?

Harvest

How do I harvest value from the deal?

HowwecanhelpStart to end support in deals and capital market transactions

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• Identify the suitable listing destination

• Understand and evaluate the potential listing structures available

• Understand financial reporting requirements for the various listing destinations or structures

• Identify the acceptable accounting standards and restate historical financial statements

• Strategic business planning to create a well-constructed, and attractive IPO story for the investors

• Group restructuring and management reorganisation

• Review effectiveness of existing finance function, technology infrastructure, and management information and reporting systems

• Review corporate governance and internal controls requirements

• Identify tax leakages and the associated tax minimization strategies

• Identify tax efficient corporate structure for warehousing phase

• Compliance with the listing criteria

• Compliance with the financial information and prospectus disclosure requirements

• Preparation of historical financial information

• Preparation of financial forecast

• Obtain ruling from tax authorities for certainty of tax treatment and tax exemption/relief

• Appoint independent directors and board subcommittees

• Corporate strategy and development

• Compliance with continuous listing requirements

• Compliance with corporate governance code

• Establish risk management and internal controls framework

• Review management information and reporting systems to meet the requirement of the listed company

• Set up investor relations functions

• Set up effective tax functions and compliance process

IPO (including REITs and business truts) continuum and summary of services

Pre-IPO Process

“Assess” current landscape and facilitate listing process

Listing Process

“Design and Construct” for listing readiness

Post Listing

“Implement and Sustain” listed status

Capital market transactionsAs reporting auditor or advisors, we advise our clients from the beginning to the end of the IP process order to maximise value out of the transaction.

We add value in an IPO process as follow:

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Howwehavehelped our clients

• A successful roadmap for an IPO

• Maximising the value out of an acquisition

• Getting the desired results through collaboration

• Business process re-engineering study and preperation of enterprise resource planning (ERP) system implementation requirements

• Document imaging solutions for cost savings and productivity

• Capitalvstradinggains–Itcanbeafineline

• Improving procurement and reducing costs

• Embedding internal controls in daily operations

• Improving procurement process using analytics


Client’s challenges

An overseas real estate client was considering an initial public offering (IPO) on the Singapore Exchange in future. A key challenge faced by the client was to ensure that they are ready and have a complete understanding of the listing process as well as the requirements.

How we helped

PwC formed a team comprised of specialists from our Capital Market Services and Risk Assurance units who have extensive capital market and real estate experience. A PwC network firm from the client’s country was also part of our service team and brought in local knowledge to the table.

We shared with the client a roadmap towards becoming a listed company and conducted a pre-IPO readiness assessment on their current policies and procedures.

Value added

The roadmap gave the client a comprehensive, start-to-end overview of the journey as well as the specific steps they need to take in order to ensure a smooth transition to a listed company.

A successful roadmap for an IPO

Other solutions we provide• Initial public offering• Reverse takeover• Debt offering • Pre-IPO readiness assessment

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A client was making a major move into the hotel industry. They had limited experience in the acquisition of real estate and thus was having different considerations in structuring the deal. Furthermore, the client also needed to consider the options and methods to manage the hotel as well as retail outlets after the transaction and weigh the pros and cons of each alternative.

How we helped

PwC’s M&A team worked with the client and conducted a due diligence on the target company to assess the areas to be noted for purchase price and other post deal considerations including the risks and merits of entering a lease-back arrangement vis-à-vis hotel management agreement. These considerations were then used by the client in their decision on how to proceed with the deal.

Value added

The client adopted the recommended approach and was able to negotiate with the seller to achieve significant savings on the purchase consideration.

Maximisingthevalueoutofanacquisition

Other solutions we provide• Cost and impact analysis for operational overheads and related party

transactions• Conduct study covering the impact of lower foriegn workers dependency

ratio and higher levy rates• Normalisation of non-recurring expenses and one off items to assess the

sustainability of the Target company



A client wanted to set up a fund in Singapore to invest in foreign properties and wanted to apply for a tax exemption. The client made plans for structuring the Trust and the SPVs but the challenge was from the way the tax legislation was drafted, the two tax exemption schemes could not give the desired tax result for the Trust and the SPVs.

How we helped

The Tax team, on realising the restrictions under the legislation, reached out to the relevant authorities to put forward the client’s case and negotiate with a focus on commercial needs and the rationalisation of tax exemption schemes to cater to the needs of the real estate fund market.

Value added

We helped our client secure approval from the relevant authorities so that the client could put in place its desired structure with the tax result they needed. Furthermore, given the compelling arguments made, the legislation was suitably amended to accommodate such fund structures, which eventually benefited a lot of other similar businesses.

Gettingthedesiredresultsthroughcollaboration

Other solutions we provide• Tax optimisation• Transfer pricing study• Tax advisory (funds, investments and REITs)

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Client’s needs

The client operates multiple hotels and the management identified the need to seek new efficiencies and to source for assistance in evaluating the existing core business processes in tandem with a new ERP implementation.

How we helped

Our Management Consulting team was engaged to spearhead the review and provide a customised proposal by performing the following:• Review the existing core business processes in finance,

procurement and sales cycles • Propose solutions to improve the efficiencies of business

processes to align with new ERP system• Propose detailed requirement specifications for the core

business processes for a seamless implementation of the new ERP system

• Recommend and identify process improvement opportunities

• Develop a set of business requirement specifications (BRS) and a set of selection criteria, tailored to the client’s business process needs, to source for the most ideal ERP

Value added

Through the study and evaluation matrix that we developed, the client successfully selected a suitable vendor to assist with the implementation of the ERP. The tailored BRS also helped significantly with narrowing and focusing on the implementation of the core functionalities to meet management’s deadline of implementation within 6 months upon vendor engagement.

Business process re-engineering study and preperation of enterprise resource planning (ERP)systemimplementationrequirements

Other solutions we provide• SAP GRC implementation• Finance and ERP consulting



A real estate client wanted to implement an electronic document management and repository system to eliminate the need of keeping paper files. In the event of a law suit, some of these electronically stored documents may need to be presented in court as evidence. The question faced by the client was whether their electronic documents can be introduced as evidence in courts of law?

How we helped

PwC helped the client understand the certification criteria as set out in the Evidence Act (the “Act”). Through conducting presentations and workshops, we helped increase stakeholder awareness and identify gaps in their processes.

As the appointed Consultant for the system implementation project, we worked closely with management and the legal department in preparing and ensuring the system specifications meet the Act’s requirements. We also conducted workshops for our clients and their system integrator. Furthermore, we provided input to ensure that the system and the related processes will be certified under the Act.

Value added

The presentations and workshops clarified the requirements under the Act and helped the client prepare system specifications that would meet the requirements. This helped our client eliminate their paper filing system, which resulted in increased productivity and savings on storage costs.

Document imaging solutions for costsavingsandproductivity

Other solutions we provide• Security review of systems which are newly implemented

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A real estate client acquired a property and decided to sell it within 12 months from the initial acquisition due to changes in the financial environment.

It was not the client’s intention to flip the property for a quick gain but the tax authority viewed that the gains, which was substantial, is not capital accretion and is subject to tax.

The client was not optimistic but needed to convince the tax authority that the gains were capital in nature.

How we helped

Leveraging on our deep acumen on the real estate industry, the PwC Tax team helped our clients build their business case to the tax authority and articulated the substance behind the decisions of the buying and selling of the property within the short time-frame.

Value added

The argument put forward by PwC was accepted by the tax authority and the client saved the total amount on tax liability (more than S$8m) which they were initially prepared to pay and had been provided for.

Capitalvstradinggains–itanbeafineline

Other solutions we provide• Tax optimisation• Transfer pricing study• Tax advisory (funds, investments and REITs)



A construction entity experienced a number of procurement related process and control lapses. The procurement procedures had not gone through a thorough review for a number of years, resulting in an execution-oriented function that was not capturing opportunities to add value to the process.

How we helped

The PwC team interviewed key stakeholders to review all procurement dimensions and conducted a high level quantitative spending review, benchmarked with global-level best practices, to assess the effectiveness of the overall procurement function. This exercise was followed by numerous workshops to validate opportunities for improvement in the client’s procurement practices as well as to introduce cost reduction initiatives.

Value added

Key benefits to the client were the rapid identification and validation of areas for improvement within the procurement function, including opportunities to reduce cost by up to 10%. Additional outcomes included a comprehensive understanding of current state function as well as business buy in and commitment to developing the procurement function.

Improvingprocurementandreducing costs

Other solutions we provide• Procurement operating model re-designing• Establish centralised procurement functions • Provide procurement strategy roadmap• Review and assess eProcurement functions

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The client is a REIT Manager and they were not familiar with the regulatory requirements in a highly regulated industry.

How we helped

PwC’s Risk Assurance team identified critical improvement opportunities in several processes which were key to the client’s operations. Our recommendations helped the client quickly implement the key controls to mitigate significant risk areas.

Furthermore, we developed policies and procedures for the key processes which helped the client embed a control conscious culture in their day to day operations.

Part of our work included performing a review of the client’s compliance to the Securities and Futures Act. We addressed the areas where there were non-compliances and highlighted improvement opportunities. We also recommended critical action points for management to implement immediately.

Value added

Through our continuous partnership with the client, they have progressed from a company with minimal internal control procedures to a control-focused company where policies and procedures for all key processes have been clearly documented and disseminated.

The client now continues to consult us on a regular basis on internal control matters before they undertake any new projects or implement new processes.

Embedding internal controls in daily operations

Other solutions we provide• Internal audit• Business controls advisory• Business resilience• Corporate treasury and commodities solutions• Performance assurance


Other solutions we provide• Personal Data Protection Act • Master data management • Information management, benchmarking and governance • Business intelligence and analytics

Client’s needs

In the light of the recent high profile procurement public cases, our client, a leading group of hotels, identified the need to re-look at their internal procurement process and past trends. They engaged PwC to conduct a review of their procurement and payment transactions as well as processes to highlight potential gaps and to determine unusual procurement trends.

How we helped

We talked to the client and understood the client’s existing procurement procedures, processes and policies. Furthermore, we obtained relevant data from the client’s financial system. We then used data analysis techniques to analyse the data against certain set of hypothesis. Based on the result, we highlighted potential control gaps, potential process improvement opportunities, areas of non-compliance with client’s procurement policies, system weaknesses and inefficiencies in the client’s procurement process. We also provided recommendations to tighten the existing controls and improve the efficiency and effectiveness of their procurement process.

Value added

This review provided greater assurance to the management and the audit committee that their procurement procedures were appropriate.

Furthermore, this project identified a number of process improvement opportunities which can lead to cost savings, savings in processing time and the elimination of revenue leakages.

Improvingprocurementprocessusing analytics

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ResearchandinsightsSharing our perspectives through thought leadership

Emerging Trends in Real Estate®Asia Pacific 2014This annual report, jointly undertaken by the Urban Land Institute (ULI) and PwC provides an outlook of Asia Pacific’s real estate investment and development trends. It also examines the region’s real estate finance and capital markets, trends by property sector and metropolitan area, and also provides a snapshot of real estate prospects of the top investment cities in Asia.

http://www.pwc.com/sg/en/publications/aprealestemerging.jhtml

Compare and contrast: Worldwide Real Estate Investment Trust (REIT) Regimes During the past year, Real Estate Investment Trusts (REITs) have come back from the financial crisis showing an impressive upswing. The REIT regimes respond well to the ever-changing market environment and are continuously evolving. This publication keeps you up to speed and lets you compare the key attributes of selected REIT regimes

http://www.pwc.com/gx/en/asset-management/publications/compare-and-contrast-worldwide-real-estate-investment-trust-reit-regimes.jhtml

Real Estate Going GlobalTax and legal aspects of real estate investments around the globeProviding you with the latest summaries of the tax and legal aspects of real estate investments in 60 countries, the key features of this country specific report includes an overview of the tax systems and detailed guides to property investment in the various jurisdiction.

http://www.pwc.com/gx/en/asset-management/publications/going-global.jhtml

Asset Management Insights

Real estate links sustainability and shareholder valueReal estate investors are getting greener and they’re keen to show it. Recognising that environmental, social and governance performance can boost buildings’ rents and values – optimising the balance between risk and return – a growing numbers of real estate companies and fund managers are incorporating sustainability practices into day-to-day decision making and due diligence.

www.pwc.com/gx/en/asset-management/asset-management-insights/real-estate-links-sustainability-and-shareholder-value.jhtml


Value of Sustainable Procurement PracticesBased on collaboration with INSEAD Social Innovation Centre and EcoVadis, the report is a quantitative analysis of value drivers associated with Sustainable Procurement Practices. Sustainability was mainly taken into account on a risk-based approach in line with the global movement towards low cost country sourcing. But how can this risk protection be quantified? And what is the impact on cost reduction and the development of new offers/products?

http://www.pwc.com/gx/en/operations-consulting-services/publications/value-sustainable-procurement-practices.jhtml

M&A CommunicationsThe need for effective communication is often overlooked or underestimated in the flurry of activity surrounding a deal. Executing a strong and clear communication strategy is critical to successful integration. Dealmakers have a choice; they can communicate honestly and transparently to manage speculation surrounding the transaction, or they can ignore the speculation and watch it turn into fear and confusion.

http://www.pwc.com/en_US/us/transaction-services/publications/assets/communications-integration.pdf

Which market?An overview of regulatory listing requirements in London, New York, Hong Kong and Singapore

Having decided that a public offering is the next step in your company’s development, choosing ‘where’ to list is one of the next most important decisions to consider, whether you plan an initial public offering (IPO) or a secondary listing. This brochure identifies the main regulatory requirements involved in a listing in some of the current leading global stock exchanges: London, New York, Hong Kong and Singapore.

http://www.pwc.com/gx/en/audit-services/publications/stock-exchange-overviews.jhtml

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Global IPO Watch publications

Global IPO Watch publications PwC’s list of country-specific annual publications, reporting on the analysis and trends of IPOs in Greater China, the United States, and Europe.

http://www.pwc.com/gx/en/audit-services/capital-market/ipo-watch.jhtml

Cross-border IPOs: Choice in an uncertain worldThe cross-border IPO is here to stay. This in-depth report from PwC and Baker & McKenzie, supported with data and interviews with capital markets players, explores how we got here, what’s driving the growth, and where this important trend is leading.

http://www.pwc.com/gx/en/audit-services/publications/ipo-cross-border-survey.jhtml

Executing a successful IPOThis PwC paper discusses the key issues facing companies contemplating an Initial Public Offering (IPO), including regulatory concerns, access to capital, mergers and acquisitions, talent management and building company brand.

http://www.pwc.com/gx/en/audit-services/publications/executing-a-successful-ipo.jhtml

APEC CEO SurveyTowards resilience and growth: Asia Pacific business in transitionThis study surveys nearly 500 business leaders on their attitudes towards doing business in the region and study provides you with the insights to better understand the views of business leaders across the APEC economies as they assess the forces changing the world and their business growth strategies.

http://www.pwc.com/us/en/apec-ceo-summit/index.jhtml


Teo Wee HweeTax, Partner+65 6236 [email protected]

Yeow Chee KeongReal Estate and Hospitality Industry Practice Leader+65 6236 7298 [email protected]

Getintouchwithourindustryspecialists

Paul PakAssurance, Partner+65 6236 3288 [email protected]

Yong Jiunn SiongRisk Assurance, Partner+65 6236 [email protected]

Assurance

Chua Lay SeeAssurance, Partner+65 6236 3208 [email protected]

Magdelene ChuaAssurance, Partner+65 6236 3668 [email protected]

Risk Assurance and Advisory

Lie Kok KeongAdvisory, Transaction Accounting & ValuationsPartner+65 6236 [email protected]

Lim Maan HueyTax, Partner+65 6236 [email protected]

Capital Markets Transactions (REITS and IPO)

Tham Tuck SengCapital Market Services Leader+65 6236 [email protected]

Alex TohCapital Market Services, Associate Director+65 6236 7015 [email protected]

Rebekah KhanCapital Market Services, Partner+65 6236 [email protected]

Tax

Choo Eng BengAssurance, Partner+65 6236 [email protected]

Tan Hui ChengTax, Partner+65 6236 [email protected]

Charles LohAdvisory, Management ConsultingPartner+65 6236 [email protected]

www.pwc.com/sg

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopoers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of your or anyone else acting, or refraining to act, in reliance on the informaition contained in this publication or for any decision based on it.

© 2014 PricewaterhouseCoopers. LLP All rights reserved. “PricewaterhouseCoopers” or “PwC” refer to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agen tof PwCIL or any other member firm.

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